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equity release

Equity release is a type of lending that’s generally only available to people aged over 55. It involves people borrowing money against their home - so they can access the money that’s tied up its value without moving out.

Because of the way interest is added over the years, people can end up owing significantly more than they borrowed. But if everything goes to plan, the money only needs to be paid back after the borrower (or borrowers) dies or goes into care.

need to know

We often hear from relatives of people who've died or gone into care, who've found out about the amount of money that needs to be paid back. Some feel their relative was vulnerable - and was talked into equity release.

If someone wants to end an equity release agreement early, it’s likely they’ll need to pay an “early repayment charge”. Some people complain that equity release wasn’t right for them - because they’d always planned to move or downsize.

We’re also asked to sort out disputes over whether someone needs to go into care. Or where a couple have released equity together, we’re asked whether it’s fair that the charge should apply if only one of them dies or needs care.

In general, we find most people receive suitable advice about releasing
equity. But if it wasn’t a suitable option, we’ll tell the equity release
provider to put the borrower - or their estate - in the position they’d
be in if they’d received suitable advice.

When we’re putting things right, we’ll take into account any fees or
charges someone’s paid - and how they used the money they borrowed.
And we might tell the equity release company to pay compensation
for any upset or inconvenience they caused.

senior ombudsman

As part of releasing equity, people are often advised to discuss their plans with their family. But they may choose not to - meaning it comes as a shock to their loved ones that they owe thousands of pounds. In fact, two in three complaints we get about equity release come from relatives of people who’ve died or gone into care.

Money’s not always easy to talk about. But I’d really encourage people to have honest conversations with their family. It could save a lot of upset later on, when you’re not able to explain your decisions.”

how does equity release work?

To release equity, you can take out:

a lifetime mortgage - where people borrow a percentage of the value of their home, with interest added over the years.

a home reversion plan - where people sell a percentage of the value of their home to a company, who get the same percentage of the proceeds when it's sold.

People can take the money as a lump sum, a regular income or both. Some products may come with a “no negative equity” guarantee, meaning people won’t ever owe more than the value of their home when it’s sold.

Another type of lifetime mortgage - “shared appreciation” mortgages - aren’t sold any more. We can’t usually look into complaints about these, because the businesses involved weren’t regulated.